Detroit Bankruptcy Raises Questions in California

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(Sacramento, CA)
Monday, December 9, 2013

A Michigan judge has ruled the city of Detroit is not legally bound to pay its entire pension obligation as it enters bankruptcy.

That concerns Jeff Zack with the National Firefighters Association, a labor organization. But he points out the ruling is limited in scope.

“It does leave open questions now, about the protections of pension funds nationwide," he said. "However, this ruling is limited to cases of bankruptcy.”

Zack said eliminating pensions could be devastating to retirees who were counting on the money to survive. Unions in Detroit plan to appeal the ruling.

Still, Joe Nation, a Stanford Professor and former California lawmaker, said the Michigan ruling is a game changer.

“The people who, again, have defended the status quo to date now have to acknowledge that they were wrong," he said. "Maybe those pensions aren’t as secure as they thought they were even in bankruptcy.” 

The Michigan ruling isn’t applicable in California. But Nation said the idea that pensions are now open for review could influence negotiations between unions and governments.

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